Go Agro
The more things change, the more they stay the same. I have said it over and over again. Greater minds have trumpeted the same logic for centuries. We evolved from feudalism and agricultural economics to the industrial revolution and eventually capital markets. The lords of the manor and their chateaus in the country were displaced by urban megalopolises and their ivory tower penthouses. The illiterate warlords were replaced by eloquent gents with manicured hands.
But then somebody hit the reset button...and we are going back to square one. Do not pass "go" do not collect your TARP money. Witness instead the victory of the farmer, the field hand and rationalists from Jim Rogers to our own Illini Programmer. As big wigs like John Paulson take brutal body shots in the markets this year, guys you never heard a word about are raking in monster returns. It is precisely this new generation of value investors, focused on the most crucial gears of the economic machinery who will be tomorrow's billionaire barons. To paraphrase Jim Rogers, himself: Investment bankers should become farmers if they want to keep on driving Maseratis.
Just about the only certain bet in today's topsy turvy world of finance is that food prices will steadily rise. The growing global population, the increasing demands for specific food products and the near extinction of the small farmer have all conspired to make food the ultimate bubble which is highly unlikely to pop during any of our lives. Agribusiness is the first step on that road to gluttonous riches.
My simple advice to any of you guys wondering where to stash that excess cash, would be to look no further than the bread aisle at your local supermarket. Whether its wheat, corn or pork belly contracts or something more exotic, you will not go wrong with the agribusiness in the coming years and decades. For those of you out of a job or looking for one I would suggest a decidedly non linear approach...
Go find yourself a grain elevator somewhere in the Midwest and shovel shit for a year or two. The pay will suck and your back will feel like snapping, but the experience you gain will be priceless. The combination of a financial education and experience in the operational aspects of agribusiness can and will lead to far greater pay, profit and (most importantly) potential for anyone who rolls the dice.
Just thought I would put it out there for those still wondering what to do and where to go with their assets and their asses. Good day ya'll.
Where is that post on why China is going down?
Easy T-Role...it's in the mail, clearing customs.
I remember that companion piece you wrote a while back about "remembering your ABCDs"...always time to buy agribusiness stocks!
Yep, those immigrant workers sure are getting the best of us. Are they paid on the books yet?
I don't tip
http://www.youtube.com/embed/cYV7FkoUNPY
Wow! BEATNUTS! You threw it back semi-old school with that joint. Made my night.
Anyways, I definitely agree that agricultural goods and the agribusiness is on the rise. We started to focus our trades in the agricultural space. With the U.S. being the breadbasket of the world, emerging countries like China won't be able to ignore the U.S. agricultural market. Brazil is another country to watch out for in the agricultural space. The space is heating up
I disagree. Food prices have risen dramatically over the past year, but are forecasted to remain flat over the next year. Of course long term they will rise, but this is true of most investments.
As someone who's in agricultural markets... I agree with Midas for the most part that food price is expected to go higher in the long term, and that agribusiness in general is a profitable one. I not sure how one can make (easy) money out of that fact, however. Perhaps I am wrong since I am also quite new to the industry, but here's my 0.02:
(1) trading in ags markets on a day to day basis does not involve much of long term projection, if any - the longest timeline we think of at the BB is the next crop year, since weather and seasonality make it difficult to go beyond one or two calendar years for crop production and trade flows. So the grand narratives of food inflation and chinese growth do not really apply to the traders on the floor, although they might use such knowledge as background for strategies.
Even then, most of the time market has already priced in that factor since the large chunk of grains and oilseeds markets are controlled by producers and consumers, who work on the fields, know their margins and have a better sense of how much China will grow next year for pork demand. I think Ags futures/options markets work more or less similar to the rest of commodities, perhaps only less liquid and more fragmented due to the logistics
(2) Of course firms like Cargill or Bunge make tons of money each year but it's a different story. As an individual I think it's extremely hard to make money in agribusiness or anything even remotely related to it since the market is dominated by the physical houses(i.e. firms mentioned above) which have the capacity to grow, harvest and deliver their crops to make more value-added products. If the price goes against their favor for say soybean, they can simply crush their soy to make more meal to export to China and oil to sell in the domestic market. Or if wheat price goes down they can decide to store them for a bit longer instead of transporting them out of Midwest via barge markets. But as a small producer you can't have the whole facility nor workforce to make such lenient decisions.
You might be able to buy a piece of land in Minnesota or Kansas, but unless you are thinking of holding that land for the next 10-20 years I don't think you can realize a reasonable amount of profit ... plus land and real estates are much less liquid assets than equities or fixed income.
(3) Most dudes in agribusiness work as farmers(or some specialist in farming industry) and die as farmers. They are not like us investment banking wannabes looking into the next sexy markets for opportunities... meaning that, on average people on ags business don't make it rain at all.
Not to discourage anyone having an interest in agricultural markets or ags business, but I just felt that ags is no different from other commodity sector... while most everybody thinks prices will go only higher, the market has already priced that expectation in (at least in my opinion for certain ags products now)
Was thinking of buying some corn and wheat ETFs to diversify my commodities exposure (holding gold and silver now). What are people's opinions on funds such as CORN now?
Recently put about 20% of my nest egg into a 100+ acre farm (no debt, cash purchase). I view it as asset diversification, not to mention I get the enjoyment of the property (hunting, ATVing, fishing in pond, etc) as an additional "return" on my investment. Plan is to hold it long term.
@ yellowpunch:
Yea agreed that seasonality and unpredictability in the agri-space makes it tough for long-term projections.
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